European Banks Crash For Fourth Straight Week

European banking stocks collapsed for a 4th straight week on Friday, recording their worst losses since 2012.

The record collapse of 20-percent marks the biggest loss since April 2012.

It was reported last June that Germany’s Deutsche Bank, the second-largest investment bank in the world, was on the brink of collapse due to over-exposure in the derivatives market. Then, Deutsche Bank owed 55 trillion EUR, which is 20 times bigger than the GDP of Germany. A majority, 70-percent, of all derivatives are interest rate derivatives that are secured with government bonds.

A silent run on the largest banks in Italy, Europe’s third largest economy, was reported last month.

The news comes after the European Central Bank’s ‘bold steps’ to stave off deflation and encourage banks to lend money, issued last month.

Francois Perol

Francois Perol, chairperson of France’s second-biggest retail bank Groupe BPCE, blamed negative interest rate and digitalization, reports Reuters.

“Chinese growth is decreasing, oil prices are down with unexpected consequences, geopolitical risk is in a lot of areas,” Perol told Bloomberg News on Saturday during sidelines of the Ambrosetti Workshop in Cernobbio, Italy.

“I am much more worried than I was in 2009 in certain respects,” Perol said. “It was 100 percent clear what had to be done [in 2009]. I think it’s more of a difficult situation for banks (now) because fundamental changes are underway in an environment that’s incredibly challenging due to negative interest rates.”

Negative interest rates are hurting profitability across the financial sector, said Perol. “I think it should be seen as an extraordinary environment, but it could be our environment for a few years.”

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